By Isis Almeida

(Bloomberg) - The crisis in the Suez Canal may soon hit instant coffee.
The ship that blocks passage at one of the most important maritime bottlenecks in the world not only limits shipments of oil and liquefied natural gas, but also containers of robust coffee, the type used in Nescafé. Europe is the most affected because it imports through the Suez Canal, but the impact will be felt globally, as shipping delays aggravate the lack of containers hitting food markets.

The huge container ship Ever Given ran aground on the major trade route on Tuesday, blocking the passage of ships with nearly $ 10 billion worth of goods to be transported by the Egyptian waterway. Stripping off the 200,000-ton ship can take days or even weeks, and congestion around the channel has already doubled.

"Tradings will have a hard time supplying customers in Europe," said Jan Luhmann, founder of JL Coffee Consulting, who previously handled coffee purchases at Jacobs Douwe Egberts, one of the largest coffee roasters in the world. "If we're lucky, it will take a few days to resolve this, but still, a lot of damage has already been done."
Green beans of robust coffee are selected at a processing plant in Ho Chi Minh City, Vietnam.

About 12% of global trade passes through the Suez Canal, and the waterway is better known for its role in the energy markets than for agricultural commodities, such as coffee. Still, only two major producers of robusta coffee - Brazil and Côte d'Ivoire - do not use this key route to serve large consumers in Europe.

Roasters on the European continent were already finding it difficult to receive coffee from Vietnam, the world's largest producer of robusta, due to the shortage of containers. Just when the availability of containers started to improve, blocking the channel brought another headache. All the grains that Europe imports from East Africa and Asia flow through Suez.

“Can roasters withstand delays of two to three weeks? Probably not, ”said Raphaelle Hemmerlin, head of logistics at trading company Sucafina. "I don't think they have the reserve stock they normally have."

In addition, the outage will have a global impact due to container retention, exacerbating the scarcity that has already brought US stocks to the lowest level in six years. In addition to the boxes getting stuck on ships in the canal, when traffic is cleared they will return to ports like Antwerp and Rotterdam, said Hans Hendriksen, who has been selling cocoa and coffee for 40 years.

"The longer it takes to resolve the problem, the more the logistics will be affected," said Hendriksen, who now advises exporters, as well as small and medium-sized trading companies.

Unlike roasters in the United States, coffee makers in Europe cannot easily use robust coffee supplies from Brazil due to the taste of the products. As a result, some roasters on the continent have recently turned to supplies from East Africa to fill Vietnam's robust grain shortages, with purchases from countries like Uganda or the region's mildest-tasting Arabica beans.

But these grains are also transported through the Suez Canal. Tradings with inventories in European warehouses are charging a high premium in the physical market. At the height of the lack of containers, traders charged $ 450 a tonne over the price of Vietnamese coffee stored in Europe, three times the normal rate.
Ships await passage through the Suez Canal due to the blockade caused by the container ship Ever Given, March 25.

"Inventory in Europe is very tight, and the spot market is set to catch fire," said Luhmann, of JL Coffee Consulting. “The stock in Vietnam is comfortable, but what is the value of it if you can't ship it to Europe?”
Brazil has so far benefited from price shifts caused by the scarcity of containers that hit Vietnam at the end of last year. The second largest producer of robusta exported a record 4.9 million bags of coffee in 2020, an increase of 24% over the previous year, according to Cecafé.

Still, most of these grains ended up in certified pouch stocks, not in toasters. This is because the replacement of Vietnamese coffee by Brazilian beans would change the taste of the final product for the consumer. East African beans are a better alternative.

"Will roasters change their recipes?" Asks Hemmerlin, from Sucafina. “It's not that simple.”
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